China's Pipe Dream Turns Into a Public Relations Nightmare

China’s oil and gas pipeline in Myanmar is making progress and projected for completion by mid 2013. Yet all is not well for the Middle Kingdom with its long-time ally Myanmar. Despite spending billions on the pipeline and trying to appease local villagers and farmers that had to be relocated to make way for the pipeline, the massive project has created a backlash in Myanmar and even globally. International NGOs, human rights organizations and environmental groups have stepped up media attacks against the pipeline with one goal in mind: To stop it before it can be completed. Many think that their efforts are futile but recent history dictates otherwise. Once public support in Myanmar is solidified it can be a powerful force.

Critics claim that nearly all the gas involved will be exported to generate power in China despite the fact that roughly 75 percent of the Myanmar population doesn’t have access to electricity from the national grid. They make a good point. In May protests broke out in the streets of Rangoon over persistent power outages. Some protesters clashed with police, drawing international media coverage at a time when Myanmar’s new government is trying to bring in fresh foreign direct investment (FDI) and make good on promises of greater political reform. The government, scrambling for solutions, could only resort to stop-gap measures by ordering three 120-megawatt gas turbines from Japan. Likely those measures will not appease a frustrated populace for long.

Pipe dreams

The Chinese aim in building the pipeline, in addition to feeding its insatiable appetite for hydrocarbons, is also geopolitical. By bringing in oil from the Middle East to the Myanmar coast, a portion of China’s crude imports will bypass the Strait of Malacca.

The oil and gas pipelines will run parallel from Myanmar’s west coast, through the country’s mid-section before entering China at the border city of Ruili in Yunnan province. A crude oil terminal will also be built on the west coast of Myanmar”s Kyaukryu. The gas pipeline will receive gas from the offshore Shwe gas fields.

The oil pipeline will be 771 kilometers (479 miles) long while the natural gas pipeline will extend further to Kunming and Guizhou and Guangxi in China, running a total of 2,806 kilometers (1,700 miles).

The oil pipeline is jointly invested and built by CNPC and Myanmar Oil and Gas Enterprise (MOGE) and administered by the South East Asia Crude Oil Pipeline Company (SEACOP). The gas pipeline is jointly invested and built by CNPC, MOGE, Daewoo International, KOGAS, Indian Oil and GAIL and administered under the company name of the South East Asia Gas Pipeline Company (SEAGP). CNPC has operating control of SEAGP. Additionally, CNPC has already signed a 30-year deal to purchase natural gas from the Shwe fields, the A-1 and A-3 blocks.

The U.S. Energy Information Administration (EIA) places Myanmar’s proven natural gas reserves as of 2010 at ten trillion cubic feet (Tcf). However, Myanmar’s Minister of Energy Than Htay told Reuters in January that his country”s natural gas reserves are at 22.5 Tcf, almost double the 11.8 Tcf estimated by oil major BP in its 2011 statistical review. Most analysts doubt these inflated figures, pointing to inadequate research data and a lack of modern surveying over the last 20 years.

According to Oilwatch Southeast Asia, a regional grouping of NGOs, Myanmar is exporting roughly one billion cubic feet (bcf) of gas per day and this will grow to over 1.6 bcf per day with new sales commitments to China and Thailand. Currently, natural gas from Myanmar accounts for around 30 percent of Thailand”s consumption, mostly used in power generation.

Myanmar”s natural gas exports pulled in $3.563 billion in the fiscal year 2011-12, up about $640 million from $2.92 billion in 2009-10, Xinhua News Agency reported. The IMF forecasts that Myanmar”s gas revenue will rise to $4 billion in 2013.

PR war intensifies

The PR war over the pipeline has gained momentum in recent weeks pitting the Shwe Gas Project, a watchdog group based in Thailand that opposes what they call the “exploitation of Myanmar’s natural gas reserves,” against CNPC interests.

” [The pipeline] is a great boon to Burma’s [Myanmar’s] powerful neighbor, but of more dubious benefit to its people,” Irrawaddy wrote. “With this in mind the two companies behind the project, SEAGP and SEACOP, have mounted a concerted effort to counter perceptions that the pipelines are little more than largesse to the main foreign backers of Burma’s [Myanmar’s] former junta.”

Allegations against abuses abound, including forced displacement, militarization and conflict in northern Shan State, loss of livelihoods, environmental degradation, lack of public information and local participation, and inadequate benefits for local communities.

One pressing allegation is that displaced farmers have not been adequately compensated.

“Widespread land confiscation to make way for the pipeline corridor has already left countless people landless and jobless, while others along the pipeline are facing human rights violations and exploitation,” the Shwe Gas Movement claimed in a statement.

In response, China fired back. Chengun Dong, the deputy manager of SEACOP’s jetty project on Maday Island, near Kyaukyu, where construction on the pipeline began, disputed the claims of the Shwe Gas Movement, stating that the group’s website publishes the wrong information.

“We also donated $8 million for the first year and pledged to spend $2 million for each subsequent year for the next 30 years to support the education and health care of local residents along the pipelines,” Dong said.

“Despite fears that the project could be derailed by popular opposition, work on the pipelines is moving forward at a steady pace, and is on track to meet its projected completion date. Currently the gas pipeline project is 70 percent complete, while the crude oil jetty is about 50 percent finished,” added Dong.

CNPC states on its website that the pipeline project team handled land acquisition issues based on the principle of “voluntary decision” and “minimal impact on farmland,” and paid compensation for the converted land in a fair, transparent and legal manner.

The company added that they rerouted the pipeline whenever the land conversion scheme had been declined by local residents or wherever a stupa [a monumental pile of earth in memory of Buddha or a Buddhist saint], temple, school, graveyard or wildlife reserve stands on the route.
The fear for China cannot be exaggerated. China has already lost once in the court of public opinion in Myanmar. On September 30, 2011 a broad-based public movement prompted the president of Myanmar to suspend, during his tenure, the Chinese backed Myitsone Dam project, angering Beijing. If a similar scenario plays out with the pipeline, particularly since so much Chinese money has already been spent on its construction, the blow to Chinese plans for greater energy security and in particular the damage to Myanmar-China bilateral relations could be disastrous.